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Valassis investor sues to halt $1.84B Perelman buyout

A Valassis Communications Inc. investor sued the board of the store-coupon distributor, saying it unfairly favored a $1.84 billion takeover bid from a company controlled by billionaire Ronald Perelman and could have gotten more money.

Robert Mason and Robert Recchia, Valassis’s CEO and CFO, held secret talks with officials of Perelman’s Harland Clarke Holdings Corp. before Harland made its $34.02-a-share cash bid, and the directors abandoned a strategic review of alternatives, the investor, a Louisiana pension fund, said in a lawsuit filed yesterday in Delaware Chancery Court in Wilmington.

“If the offer is completed, Valassis’s public shareholders will be frozen out in a grossly unfair transaction,” the Municipal Police Employees Retirement System of Louisiana said in its complaint. The fund asked a judge to block the deal.

Valassis, based in Livonia, offers marketing services including direct-mail inserts and in-store coupon dispensers. San Antonio-based Harland makes checks and check- related products. A merger would create a marketing company capable of catering to the world’s biggest financial institutions, big-box retailers and government customers, Harland officials said last month.

The deal is expected to be completed in the first quarter, after Valassis pays its previously announced dividend this week. Harland, owned by Perelman’s MacAndrews & Forbes Holdings Inc., has lined up financing from Credit Suisse Group AG, Bank of America Corp. and Citigroup Inc. to pay for the transaction.

The Louisiana pension fund said MacAndrews & Forbes officials approached Mason and Recchia in August with an offer for the company, and the two executives didn’t share the bid with other Valassis directors for more than a month while they negotiated.

After the directors learned of the offer, they set aside a review of strategic alternatives for Valassis and focused on selling the company, the fund said in its filing.

Mason and Recchia took steps to ensure Perelman’s bid succeeded, including giving the billionaire access to more information than other bidders got and more time to review the company’s books, the Louisiana pension fund said.

The directors’ decision to back the MacAndrews & Forbes offer also may have been tainted by conflicts of interest, the fund said. Board members stand to collect more than $14 million from their options and shares if the merger goes through, according to the complaint.

“This compensation and the possibility of future employment with MacAndrews & Forbes created a conflict of interest for the management defendants and other defendants that tainted the sales process,” according to the pension fund.